Rio Tinto vows to work for approval of Pilbara JV

Posted on 23 August 2010

Source: The Jakarta Post, August 23, 2010

Global miner Rio Tinto's CEO shrugged off doubts Friday over a proposed iron ore joint venture in Australia with BHP Billiton, saying he will do everything he can to win regulatory approval for a deal opposed by big ore buyers like China.

His comments came amid reports that the $130 billion iron ore production joint venture in western Australia's Pilbara region could collapse due to regulatory concerns it would give the two mining companies excessive influence over prices. The project faces regulatory hurdles in Europe, China and elsewhere, apart from Australia.

"The synergies are worth striving for; we're going to continue to strive to attain those synergies," Rio CEO Tom Albanese told reporters in Shanghai, where he was attending an industry conference. "We're going to do everything we can to see if we can attain those synergies through the regulatory process."

Rio Tinto has striven to improve the company's relationship with China, an increasingly crucial customer as the world's biggest steel producer, and to put to rest tensions over iron ore prices and the arrest of four Rio Tinto employees who were eventually convicted for bribery and infringing trade secrets in the multibillion dollar iron ore trade.

Rio Tinto's decision to give up a planned $19.5 billion deal with China's Chinalco after vocal political opposition in Australia further strained relations.

"The key for what we want to do is develop long-term relations," Albanese said. "China's going to be a larger and larger customer for the products we produce. Our strategic interests are aligned."

Albanese would not comment on the cases of the four employees, who included an Australian citizen, Stern Hu, who at the time was in charge of the company's iron ore price negotiations with China.

Hu was sentenced in April to a total of 10 years in prison while three colleagues were imprisoned for seven to 14 years.

Rio Tinto is "focusing on the future" Albanese said, saying the company hopes to partner with China in exploring the country's own mineral resources, though restrictions on access to deposits has so far hindered those efforts. "First on my list would be copper," he said.

The potential for cooperation both in China and elsewhere is evident in Rio Tinto's joint venture with Chinalco in the Simandou mine in Guinea, according to Albanese. Rio holds 50.35 percent of that venture and Chinalco will own 44.65 percent, with the remaining 5 percent taken by the International Finance Corporation, the financing arm of the World Bank.

Strains over iron ore prices - a longtime area of contention with China given its desire to exert more influence as the world's biggest buyer - have eased since the annual price benchmark system was shifted to a quarterly basis, Albanese said.

Other trends also point to a strong outlook for the company's business with China, he said.

Rapid urbanization, based mainly on construction of high-rise apartments, is boosting demand for steel, copper and other resources. China's efforts to improve energy efficiency, especially in the steel sector, will likely favor manufacturers that would tend to import higher quality iron ore rather than use domestic ore, he said.

Albanese would not comment on whether Rio Tinto would be interested in making a counterbid to BHP Billiton's hostile $38.5 billion takeover offer for Potash Corp. of Saskatchewan, one of the world's biggest fertilizer producers, eschewing what he called "commercial speculation."

But he added, "If the right resource comes our way we will look at it."